In a significant regulatory move, the Reserve Bank of India (RBI) has imposed stringent restrictions on Mumbai-based New India Co-operative Bank, triggering panic among depositors. Customers formed long queues outside the bank’s branches on Friday, February 14, seeking clarity on their funds.
This marks the first major action against a co-operative bank in Maharashtra since the infamous Punjab and Maharashtra Co-operative (PMC) Bank collapse, which was caused by large-scale fraudulent loans.
What Are the RBI Restrictions?
The RBI’s restrictions, which came into effect after the close of business on February 13, 2025, will remain in force for six months. Under these directives, the bank cannot:
- Grant or renew loans and advances
- Make any investments
- Borrow funds or accept fresh deposits
- Disburse or make any payments without prior RBI approval
Additionally, the RBI has barred all withdrawals from savings, current, or other deposit accounts due to the bank’s poor liquidity position. However, the bank is permitted to:
- Set off loans against deposits, subject to RBI conditions
- Pay for essential expenses like employee salaries, rent, and electricity bills
Impact on Depositors
With a deposit base of ₹2,436 crore (as of March 2024) and 30 branches, the bank has been posting continuous losses—₹22.78 crore in 2023-24 and ₹30.74 crore in 2022-23.
Under RBI’s guidelines, eligible depositors can claim up to ₹5 lakh in deposit insurance from the Deposit Insurance and Credit Guarantee Corporation (DICGC). This means that if a customer has a fixed deposit (FD) of ₹10 lakh, they will only receive ₹5 lakh as an insurance claim.
Panic Among Customers
Worried customers rushed to the bank’s Vijayanagar branch in Andheri, Mumbai, with many—especially senior citizens—seeking urgent access to their funds. However, reports indicate that the bank’s customer support services and mobile app are unresponsive, adding to the confusion.
Bank officials have distributed coupons to customers for locker access, but many remain uncertain about when they will get their money.
Will the Bank Shut Down?
The RBI clarified that these restrictions do not amount to a banking license cancellation and that New India Co-operative Bank will continue to operate under these conditions until its financial situation improves. The RBI will closely monitor developments and may modify these directions based on the circumstances and depositors’ interests.
Looking Ahead
This regulatory action highlights the ongoing challenges faced by India’s co-operative banking sector. The RBI’s intervention aims to protect depositors, but for thousands of customers, the uncertainty continues.
